William Cavanaugh III
1939–

Career: U.S. Navy, 1961–1969, rose to the rank of lieutenant
commander of the navy's nuclear program; Entergy Corporation,
1969–1986, several management capacities at subsidiaries, became
chief operating officer (COO) and director, became group president of
Energy Supply; 1986–1992, chairman, president and chief executive
officer (CEO) of Entergy Operations; chairman, president, and CEO of
System Energy Resources; Carolina Power & Light Company,
1992–1996, president and COO; 1996–2001, president and CEO;
Progress Energy, 2000–2004, president, CEO, and chairman.

■ As CEO of Carolina Power & Light Company, William
Cavanaugh III forged a merger in 2000 between his company and Florida
Progress Corporation to establish Progress Energy as a regional leader in
the energy business. While many power and utility companies began to
expand quickly after industry deregulation, Cavanaugh and Progress Energy
took a more cautious approach, primarily focusing on its core businesses.
Cavanaugh's conservative approach helped Progress Energy weather
industry scandal, a recession, and the vagaries of deregulation that
eventually plagued the more aggressive power companies. Industry analysts
subsequently praised Cavanaugh's approach of keeping the company
true to its utility roots while taking disciplined steps toward expansion
and diversification.

FROM THE HIGH SEAS TO HIGH WIRES

A native of New Orleans, Cavanaugh received his bachelor's degree
in mechanical engineering from Tulane University. He then spent the next
eight years in the U.S. Navy, primarily serving in the navy's
nuclear-powered submarine program. After leaving the navy in 1969 as a
lieutenant commander, Cavanaugh joined the Mississippi-based Entergy
Corporation, where he spent the next 23 years working in a variety of
positions. At first he held management positions with the company's
various subsidiaries, including Arkansas Power & Light, Louisiana
Power & Light, and Mississippi Power & Light. He went on to
serve as group president of Energy Supply; chairman, CEO, and president of
Entergy Operations; and chairman, CEO, and president of System Energy
Resources.

In 1992 Cavanaugh left Entergy and joined Carolina Power & Light
(CP&L) in Raleigh, North Carolina, as president and COO. At the
time, the company was a sleepy utility with one of the industry's
worst run plants. Over the next eight years, Cavanaugh would guide the
company toward establishing facilities that would rank among the best in
the industry.

When Cavanaugh was appointed CEO of CP&L in 1996, few industry
analysts paid much attention to the change in leadership. Within two and a
half years, however, the company had undergone major adjustments; many
insiders noted that Cavanaugh sparked more change in the company in that
short amount of time than it had experienced in several decades. Cavanaugh
oversaw several expansion efforts, including a $354 million acquisition of
the North Carolina Gas Company, the building of a $250 million gas turbine
plant in Rowan County, and the purchase of the Internet company Interpath
Communications, which Cavanaugh integrated with CP&L's
Caro-Net Telecommunications. Cavanaugh also made significant changes in
senior management and accelerated the company's cost-cutting
efforts.

WARY OF DEREGULATION

Early on in his stint at the helm of CP&L, Cavanaugh took a
cautious approach to the increasing deregulation of the power industry.
Between 1989 and 1994 Congress had passed laws that opened up wholesale
power purchasing and energy trading, with utilities sharing their grids
and buying and selling
electricity from each other. As a result, many companies optimistically
saw deregulation as the beginning of a new era of expansion and profits;
many states geared up for a more competitive retail market. Cavanaugh and
CP&L, on the other hand, remained skeptical. In an article in
Business North Carolina
, the State Utilities Commission Attorney Gisele Rankin told Edward Martin
that when a legislative commission began to debate the best method of
deregulating retail electricity in North Carolina, CP&L became
"known as the just-say-no crowd" (November 2003).

While companies such as Duke Energy, Enron, and others pressed North
Carolina for deregulation, Cavanaugh stood firm in his beliefs. Cavanaugh
and CP&L were concerned that states with higher electricity rates,
like New York, would end up draining power from low-cost states like North
Carolina and force CP&L and other electric utilities to raise their
prices. He also saw deregulation as removing companies' incentives
to invest in power grids and new plants as they focused on becoming the
lowest bidders for supplying power. In direct confrontation with Duke
Energy, Cavanaugh and CP&L initiated concerted lobbying in an
attempt to sway legislators and donated over $60,000 to a pair of groups
aligned against deregulation, which assisted two people in attaining
appointments to the 23-member commission assessing the issue. Cavanaugh
told Martin, "We felt deregulation of electricity was such an
important step—fiddling around with something that already worked
well—that we should be careful not to put the system in
jeopardy" (November 2003).

Cavanaugh rebuffed most offers at expansion and diversification. He was
especially wary of Enron, which offered CP&L a 10-year contract for
its industrial customers. Cavanaugh later recalled that he couldn't
figure how other companies were accomplishing such a great deal of
marketing and trading; that is, in spite of high volume, sources of actual
profits were unclear. In opposition to these other companies'
tactics, Cavanaugh focused his company on the core business of serving
wholesale and retail customers. He believed that CP&L was growing
and strong, and he was unwilling to go overseas or to any other place
where the company would be unfamiliar with the business landscape. Many
analysts saw Cavanaugh's philosophy as leaving CP&L out of
the ultimately profitable bigger picture.

MAKES A MOVE

While Cavanaugh may have been cautious about deregulation, he was not
going to let CP&L be left behind. In 2000 he negotiated the
purchase of Florida Progress Corporation, the parent company of Florida
Power. The merger of the two midsized companies would allow CP&L to
compete in a rapidly consolidating electricity industry and also in a new
geographic market. Cavanaugh was named chairman and CEO of the newly
formed Progress Energy.

Cavanaugh credited the small financial windfall from the merger with
partially offsetting a recent decrease in customer demand for electricity,
which had come about as a result of moderate weather, reduced purchases by
industrial consumers, and intentional temporary shutdowns at a number of
nuclear plants. Taking into account the layoffs of 1,200 employees that
had resulted from the merger, the company was on track to notch $100
million in savings through 2001 and an additional $75 million by 2003.
Cavanaugh remained optimistic about the company's synthetic-fuel,
merchant-generation, and marketing businesses, which sold electricity on
the wholesale market. He told Kris Hundley of the
St. Petersburg Times
, "Our plans for solid earnings and dividend growth have not
changed" (July 26, 2001).

GUIDES THROUGH TROUBLED TIMES

While Cavanaugh remained optimistic, he faced a struggling economy, which
reduced the forecast demand for energy. After the terrorist attacks of
September 11, 2001, Cavanaugh saw the future of energy further altered as
the economic slowdown deepened. Cavanaugh told Martin in
Business North Carolina
, "We quickly saw that the business of double-digit growth was not
going to be possible" (November 2003).

Although Cavanaugh stood on the sidelines during much of the initial
activities of deregulation, he had made limited forays into other
businesses, not all of which were successful. Expansions of gas-turbine
plants in Georgia and North Carolina were halted when wholesale gas prices
plummeted in 2002. The company's telecommunications subsidiaries
also stumbled.

Cavanaugh proceeded to try to slim down the company by selling such
noncore subsidiaries as Progress Rail Services, a rail freight-car lease
and repair service. Cavanaugh then reemphasized the company's focus
on earning profits through production of regulated electricity. In 2002
the company struggled with less-than-expected earnings of $529 million on
gross revenue of $1.9 billion. The company's earnings per share
dropped to $2.46 in 2002, compared to $2.64 in 2001. Most industry
analysts noted that the company's performance may not have been
stellar in 2002, but it consistently outperformed other utilities as it
weathered energy-business scandals and the economic downturn.

In a presentation before the company's Annual Meeting of
Shareholders in May 2003, Cavanaugh told shareholders, as reported on PR
Newswire, "Progress Energy's strategy is to remain true to
its utility roots while making strategic investments in related business
that can generate higher growth" (May 14, 2003). By the end of the
year, Cavanaugh's strategy appeared to be working. The company
reported consolidated net income of $782 million, or $3.30 per share, in
2003. In addition, the company made successful efforts to sell further
noncore assets—including the North Carolina Natural Gas subsidiary
purchased through CP&L in 1999—which helped the company pay
down its more than $11 billion of debt. These sales helped reduce the
company's capital expenditures and push its leverage (the use of
debt to increase returns) to below 59 percent. At the same time, the
company raised its dividends for the 16th consecutive year, including the
years when it was still CP&L.

MANAGEMENT STYLE: BE COMPETITIVE

Cavanaugh noted that success goes beyond capturing and holding a market
share. He stressed that management must comprise good competitors if the
company is to be able to pursue and capitalize on opportunities. As
reported in
Executive Speeches
, Cavanaugh told attendees of the 23rd National Conference of the American
Association of Blacks in Energy that achieving success "also means
working with the best suppliers and—at the heart of the
matter—attracting and retaining the best employees"
(December 2000).

Industry analysts and coworkers noted that Cavanaugh was a high-caliber
leader who stressed excellence and ethics. In 2002 Progress Energy was one
of only three S&P 500 companies to be recognized by Standard and
Poor's for providing the most complete and detailed information
possible to investors. As reported by PR Newswire, Cavanaugh observed,
"In this post-Enron era, it's more important than ever for
corporations to be clear and up-front about their financial condition and
business practices. Acting with integrity is very much the Progress Energy
way" (May 14, 2003).

DECIDES TO RETIRE

Although Cavanaugh had originally planned to retire on February 1, 2004,
the Enron scandal of 2002 and general turmoil in the industry led the
company's board to ask him to delay his date of departure.
Cavanaugh agreed but said that he would still want to retire close to the
initially scheduled date if the financial situation improved. By January
of 2004 Cavanaugh and the board believed that the state of the industry
had calmed down considerably and that Progress Energy was on firm footing.
Cavanaugh retired from his position as CEO in March 2004 and from his
position as chairman the following May.

Industry analysts agreed that Cavanaugh turned over the reins of a company
with a solid financial foundation. He accomplished this feat by making
wise decisions that successfully led Progress Energy through a recession
and through the uncertainty of deregulation. In a Progress Energy press
release, J. Tylee Wilson, the presiding director, noted, "Bill made
Progress Energy a great place to work for employees and an exceptional
value for investors" (January 23, 2004).

Upon retirement, in addition to spending more time with his family,
Cavanaugh intended to remain involved in nuclear issues for the power
industry. He served on the governing board of the World Association of
Nuclear Operators as well as the board of directors of Edison Electric
Institute, the Nuclear Energy Institute, and the Research Triangle
Foundation.

See also
entry on Carolina Power & Light Company in
International Directory of Company Histories
.